Issa seeks answers on layoff notices from defense companies

Chairman of the House Oversight and Government Reform Committee Darrel Issa (R-Calif.), wrote to the heads of 10 defense companies seeking information about the legal justification for not issuing notices of potential layoffs due to sequestration.

The automatic, across-the-board defense cuts are set to go into effect Jan. 2, but the Obama administration has told defense companies there’s no need to issue advance notice generally required under the Worker Adjustment and Retraining Notification Act.

The Defense Department said it doesn’t foresee having to terminate most existing contracts, even if the cuts go through, because the reductions are slated to reduce only unobligated funds. And if contractors don’t issue the notices and contracts are, in fact, terminated or modified, then agencies will pick up the contract-termination and employee compensation costs, the Office of Management and Budget stated in guidance issued late last month.

“The guidance seems intended to invite federal contractors to flout the law, and in so doing places a large contingent financial liability on the shoulders of American taxpayers in order to indemnify those contractors who follow the Administration’s direction,” Issa wrote in his letter to the defense companies.

Issa wants to know if the companies have sought legal advice — either in-house or external — on whether they should issue notices. Issa also asked the companies whether the administration — including the Labor Department, the Office of Management and Budget or any other official — contacted any of the companies to discuss compliance with the WARN Act.

Issa to DCAA: Are reimbursement costs ‘allowable?’

In addition, Issa wrote to Acting OMB Director Jeff Zients and Patrick Fitzgerald, the head of the Defense Contract Audit Agency, asking DCAA to determine if potential reimbursement costs paid to contractors, as promised by OMB, are considered “allowable costs.”

Issa also asked OMB to justify the legal authority used by the Labor Department to declare that companies don’t have to issue WARN Act notices and whether the administration would take any action against companies that voluntarily provide warning to their employees.

Issa sought answers from both the companies and the administration by Oct. 24.

Earlier this summer, Lockheed Martin indicated it might notify a “substantial number of employees” about potential layoffs. However, the company said last week the latest White House guidance convinced it that changes to contract funding would not take effect immediately, even if the cuts end up happening Jan. 2.

BAE Systems, another large contractor, also indicated it would refrain from issuing notices.